DEEP DIVE: In Yellen We Trust

When Janet Yellen was Fed chair from October 2010 through February 2014, I often fondly (and respectfully) referred to her as the “Fairy Godmother of the Bull Market.” I noticed that almost every time she spoke publicly about the outlook for monetary policy and the economy, the stock market moved higher.

She hasn’t been as bullish for the stock market since January 2021, when she became the secretary of the US Treasury in the Biden administration. Under her watch so far, the federal budget deficit rose to the pre-pandemic record high of $1.7 trillion over the 12 months through October (Fig. 10 below). The same can be said about the $2.3 trillion increase over this same period in marketable US Treasury securities, which are up to a staggering $5.0 trillion since Yellen joined the Biden administration.